Request for Proposal (RFP): Yield Enhancement Hook

v4
1

Overview

  • PancakeSwap, a multi-chain decentralized exchange ($1.3 trillion cumulative volume, $2.2 billion TVL) that operates on 9 chains, is inviting proposals for the development of a Yield Enhancement Hook compatible with PancakeSwap v4
  • This new feature will empower liquidity providers (LPs) to maximize the yield generated by their liquidity through integration with various DeFi protocols
  • PancakeSwap v4 supports hooks that allow developers to implement custom logic before or after key pool actions such as swaps, liquidity modifications, pool initialization, etc
  • The proposed hook will dynamically manage liquidity in pools to enhance capital efficiency and yield generation
  • The grant will come from our Ecosystem Growth fund, which was approved by veCAKE holders here.

A grant of $50,000 will be awarded to the applicant who is selected by the PancakeSwap team, and successfully completes this RFP. Apply here.

Problem Statement

  • In previous versions of PancakeSwap, LPs earned yield primarily from transaction fees. This approach left a significant portion of liquidity unutilized, reducing yield earned
  • LPs seeking higher returns had to manually move their funds between various protocols, increasing complexity and operational risk
  • Additionally, maximizing yield through just-in-time liquidity—adding liquidity precisely when it can generate the highest returns—requires sophisticated operations that are often beyond the reach of retail participants
  • The hook callbacks in PancakeSwap v4, such as beforeSwap, enable customizable logic that can automate these processes, making advanced strategies accessible

With PancakeSwap v4 hooks, we can unlock the potential of idle liquidity, allowing it to generate additional yield through integration with external protocols such as lending platforms, staking services, farming pools, or derivative markets.

Solution

The proposed solution is a Yield Enhancement Hook that will:

  1. Search for Optimal Yield Opportunities: Continuously identify the highest-yielding opportunities across DeFi protocols (architecture should be designed to be extensible, allowing seamless integration of new yield-generating opportunities as they emerge)
  2. Dynamically Allocate Liquidity: Remove idle liquidity from the PancakeSwap v4 pool and allocate it to yield-generating opportunities
  3. Maximize Earnings: Earn yield from lending, staking, farming, or other strategies while maintaining the flexibility to reallocate funds as market conditions change
  4. Seamlessly Reintegrate Liquidity: Withdraw liquidity from external protocols and add it back to the pool when required for fee generation (or use just-in-time liquidity strategies) or withdrawal requests by LPs
  5. Ensure Security and Efficiency: Implement robust mechanisms to manage funds safely and efficiently, with minimal gas fees

Scope of Work

The selected applicant will be responsible for delivering the following:

  • A hook contract that manages all the above aspects of the yield optimisation process
    • Fully functional smart contracts implementing the required hook and logic (on Github)
    • Comprehensive documentation, including architecture diagrams, functional specifications, mathematical formulas, etc (on Github)
    • Test suite covering all major functions and edge cases
  • Blog post or tutorial covering the hook design and implementation in detail
  • Demo showcasing the hook in action

Submission Guidelines

Interested applicants should submit their proposals using this link, including:

  1. A detailed explanation of their approach to building the hook, including:

    • Architecture design and working mechanism
    • Strategies for identifying and integrating yield opportunities
    • Security considerations and gas optimization methods

  2. Any additional considerations or innovative features they propose to implement

Note: Submissions should focus on the planning and design phase. Fully functional prototypes or code are not required at this stage

Timeline

  • 3 Jan 2025 0000 UTC: Deadline for submission of application
  • 10 Jan 2025: RFP results announced
  • 13 Jan 2025: Project start date
  • 10 Feb 2025: Project end date
  • 24 Feb 2025: Transfer of full grant amount

Evaluation Criteria

Proposals will be evaluated based on:

  • Feasibility: Practicality and viability of the proposed solution (20%)
  • Innovation: Creative and novel approaches to yield enhancement (20%)
  • Technical Depth: Understanding of PancakeSwap v4, hooks, and DeFi protocols (20%)
  • Security Focus: Measures to safeguard user funds (20%)
  • Documentation: Clarity and thoroughness of proposed design and plans (20%)

Resources

Disclaimer

  • We reserve the right to make all final decisions regarding this RFP, including the option not to award the grant if no proposals meet our standards. Submission of a proposal does not guarantee selection or compensation of any kind.

If you’re interested to build this hook with us, please apply here.

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We will announce the results next week instead as we need more time to review the applications. Stay tuned.

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We have selected a winner for this RFP and are working closely with them to build it out.

More details to come.

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